In 2021, Jesse Pollak was ready for something new. After five years at Coinbase, he’d made his mark on the company, expanding his team from three to 250 and running the engineering side of consumer products. Plus, he had an entrepreneurial itch.
In a bid to keep his star engineer, CEO Brian Armstrong told Pollak: Go away and find me a way to bring Coinbase “on-chain”—the crypto term for activities that occur on a blockchain.
Pollak first considered a decentralized autonomous organization, or DAO, a distinctly crypto collective that relies on a loosely knit collection of mostly anonymous individuals to make decisions.
Standing before the executive team of the publicly traded Fortune 500 company, Pollak made his request: Could he have $1 billion and 60 employees to turn Coinbase into a DAO?
“They were like, ‘We love your energy—but this is not it,'” Pollak says, laughing at the recollection.
After that, he pondered an advertising marketplace. Then an app store. Then an identity app. After a year and a half of puttering around with various potential solutions, Pollak had a realization truth: “First, we need an actual software platform.”
That led to Base, Coinbase’s own layer 2—the term for a blockchain that assembles batches of transactions and writes them to a primary, or layer 1, chain—built atop Ethereum. Launched in August, it’s widely been considered a hit. In the first quarter of 2024, it saw twice as many transactions as the widely used Ethereum and generated more than $56 million in revenue. Notable customers include Uniswap, Chainlink, and OpenSea.
“We’re reworking our way back up [the software stack] as we rebuild big chunks of Coinbase on this new platform,” Pollak explains, speaking to Fortune on a video call from his childhood bedroom in Washington, D.C. Just behind him is a mural of a tree, painted by a close family friend, with its branches springing to life around him. But his aspirations reach far beyond that: “We’re building the next generation of the internet.”
‘I feel like I was born to do this’
A lively talker who prefers discussing loftier ideals to the minutiae of mechanics, Pollak defies most engineer stereotypes. After attending a Quaker school for 15 years, he credits some of the values of Quakerism—simplicity, community, equality, stewardship—for what led him to create Base.
Pollak’s initial entry into crypto was something of an accident. He had been part of a startup that built passkeys for tech firms, but it fizzled and then he joined Coinbase as an engineer. He wasn’t ideological about crypto, but the company did provide an outlet for his passion for working hard and building things that matter.
“I don’t think my thing for crypto was ever from the libertarian angle—it was always much more like, ‘We have all of these systems that are bad right now. What if we use this technology to make it better?’” he says.
By 2023, Pollak had won the respect of hardcore blockchain veterans, making a name for himself somewhere between engineer, entrepreneur, and influencer. But with the launch of Base, his status today is closer to crypto royalty. “I feel like I was born to do this,” he says.
Base has largely succeeded because of, well, Coinbase. The layer 2 was launched carrying the stamp of approval afforded a publicly traded, consumer-facing giant. Coinbase users are automatically on Base, and wallet users are steered toward other apps from there.
“The tight integration with Coinbase makes the whole thing a lot sweeter,” Tom Schmidt, a partner at crypto venture capital firm Dragonfly, tells Fortune. “There’s very few people at Coinbase that really get crypto, and Jesse is one of them.”
Pollak would argue the Base community has proven just as vital as any brand recognition. He likened the mood among Base developers to early Silicon Valley vibes. From a 240,000-person channel on the decentralized social media platform Farcaster—its largest to date—developers swap ideas. On the video call with Fortune, Pollak shared his screen to reveal a keyboard shortcut that expedites the process of asking ChatGPT to translate the phrase “Base is for everyone” into every language for deployment on Facaster and X.
For Coinbase, having its own blockchain network supplies a revenue stream that isn’t so beholden to crypto’s boom-and-bust cycles, making the exchange less dependent on transaction fees. That need to diversify revenue has likewise led Coinbase rivals Kraken and Binance to construct their own blockchains. Those projects are in addition to a surfeit of layer 2 projects that, like Base, are built atop Ethereum—which makes it notable that Pollak’s project has gotten the traction it has.
One reason for this is that Base wants to be the fun one, Ryan Wyatt, chief growth officer at Optimism Unlimited, a community of blockchain builders, told Fortune. “All kinds of different consumer experiences are starting to happen outside of just finance,” says Wyatt.
Traffic on Base has leaned toward social and gaming: Almost half of all social finance (SocialFi) transactions occur on it, according to a recent report by asset manager Franklin Templeton. SocialFi is crypto's answer to social media: Apps are on-chain and decentralized, meaning users have control over their content and can yield rewards for posting.
There are 353 apps in the Base ecosystem, according to its website. The most popular right now are those tied to the world of decentralized finance, with exchanges like Uniswap and Jumper leading the way. But also making headway are consumer-focused applications. Among them, Friend.Tech is getting noticed, where users buy “shares” of influencers to enter their private chat room: “Your network is your net worth.” Another hit is the restaurant loyalty app Blackbird, which allows frequent diners to accrue its native token and access benefits like last-minute tables and welcome drinks.
Dragonfly’s Schmidt admits being impressed by how “non-corporate” Base feels—an atmosphere he attributes to Pollak.
‘You need to be able to show people’
Coinbase's CEO has spoken since 2022 of his quest to diversify revenue at the firm. "[We want to move] away from trading fees, to what we call subscription and services,” Armstrong told CNBC that year.
That quest is starting to pay off: In the first quarter of 2024, about one-third of Coinbase's net revenue was from “subscriptions and services.” This consists of interest earned on its stablecoin, USDC, and as well as income from staking, which entails helping customers lock up Ethereum in exchange for a reward. Meanwhile, Coinbase also generates income as a custodian for eight spot Bitcoin ETFs and from Coinbase One, a subscription program that provides enhanced trading features for over 400,000 veteran investors. In the depths of the last bear market, subscriptions and services were a lifeline, generating about half of the firm's revenue in early 2023.
But Base stands out as Coinbase's truly crypto-native application. The $56 million it generated in Q1 comes from payment-related revenue and "sequencer fees." Think of sequencers like pieces of infrastructure that verify, order, and compress transactions on Base, bundling them up and shipping them to the layer 1. In return, sequencers receive a cut of the money collected by users—and it's these fees that Coinbase says are the "primary driver" of growth.
"I want to point out that Base has really strong unit economics," Alesia Haas, Coinbase's chief financial officer, told investors on the latest earnings call. As transaction volume grows—the key growth metric Coinbase is watching—Base can become "a material contributor to our revenue and profits over the long term," she said.
But Pollak admits that it remains a big challenge getting non-crypto people into crypto, and convincing people to enter the space shouldn’t be about politics or ideology—it should be about providing them with a quality product they want to keep using. Later this summer, Base is launching its “Onchain Summer” promo alongside major brands like Coca-Cola to give away $2 million in prizes, grants, and gas credits to encourage potential users to see what it’s all about.
“In order for it to actually break through, you need to be able to show people,” he says. “We're past the inflection point where it's not possible. It's mostly just a question of who is going to do it.”
